The Land and Environment Court ruling leaves some other residents in the council area unable to replace old, small or dilapidated houses until a new Local Environment Plan (LEP) is enacted.

Rob Taylor and Nerissa Keay lost their application to replace their two-bedroom relocatable home last Friday despite Justice Jayne Jagot sympathising with their situation.

"I accept that the consequences of this construction ... is harsh for people in the applicants' position," she said in her judgment. "The council readily conceded this fact."

The couple bought their property in Wombarra five years ago after the council advised them they would be able to replace the existing house.

The land is zoned 7(b) which allows residential dwellings provided they are sympathetic with the surrounding environment.

The couple lodged a development application in August last year to rebuild as their growing family could no longer fit in their small house.

However council officers advised Ms Keay and Mr Taylor the existing LEP had been reinterpreted.

"No-one with less than 10ha (of land) can build," Mr Taylor said.

"The ridiculous thing is anyone who lives in 7(b) zoning, even if their house burnt down, wouldn't be able to rebuild."

Ms Keay said their existing use rights over the property did not extend to replacing the house and they would have to wait until a new LEP was enacted. It is due next year.

"The thing that annoys me is they told me (the LEP) was a year away a year ago," she said.

"We're now weighing up our options. One option is to rent this house out and pay more rent elsewhere.

"We don't want to renovate this house because we want to get rid of it."

Ms Keay said her neighbours recently sold their old miner's cottage with outdoor toilet and she understood the price was affected by the zoning restriction.

There is land zoned 7(b) in Helensburgh, Wombarra, Coledale and Dapto.